Executive Summary: Changes happen. Sometimes they come quickly and abundantly. Business executives rely on their Finance Teams to be in front of changes, especially when the impact is big. By proactively preparing for GAAP changes, CFOs can position their business for success. Staying informed, collaborating with experts, assessing the impact, and effectively implementing changing standards are essential to maintaining a smooth-running business operation.
As a CFO or Controller, staying at the forefront of accounting best practices and standards is crucial for maintaining financial integrity, advancing innovation in accounting, and ensuring compliance. In fact, this is a primary requirement for your accounting and finance personnel. And yet, it often goes unspoken and is seldom included in job descriptions and KSA’s (Knowledge, Skills and Abilities) for your accounting team. Additionally, there are a ton of professional restrictions that can get in the way of making this a priority, like ongoing time constraints, urgent needs, and special projects.Here are some practical steps for helping your organization to stay ahead of the curve:
- Stay Informed
Thankfully, we live in the information age! We often have a lot of the answers right at our fingertips. There are a variety of websites, blogs and other information sources that update information regularly and provide unique insights into current best practices. For example, the Financial Accounting Standards Board (FASB) website provides constant updates to stay informed on the latest accounting standards updates. You can filter to focus on upcoming changes relevant to your business type and specific topic.
There are a variety of publicly available industry newsletters and journals as well. Some of these include the Journal of Accountancy and the local Business Journal. The Denver Business Journal often includes items of interest for the local business community including new companies coming to town or real estate changing hands. This can often give critical competitive information to use in strategic planning.
Another important channel for information is the conference circuit. Whether you are attending conferences by the local Society of CPAs or industry associations like Finance Executives International, these sources provide insights into emerging trends and regulatory updates. Having served on the conference planning team for the Colorado Society over the past few years, I know that considerable time is spent on ensuring that presenters and content are both informative and entertaining. We have a conference for nonprofit accountants, industry accountants, and agriculture accountants, just to name a few. The cost of these programs is almost negligible when you consider the information and networking value gained for planning your company’s future. The networking gives you a ready resource for asking for assistance on specific issues as they develop.
The most important aspect of all this information is sharing it! You can optimize your costs by sending select employees to a conference with the expectation that they produce a 50-minute training session to share what they’ve learned with the finance and accounting team. One way to do this is through a brown-bag lunch presentation where everyone gathers over a lunch hour to hear the presentation, discuss the information and how or if this should be incorporated into your business. This type of dialog allows employees to raise any questions or concerns in a more informal environment.
- Engage with Experts
The true value of outside experts is that they need to stay cutting-edge to remain relevant and earn their value to your business. In this way, they are your trusted advisor when handling changes in rules and regulations for your business.
Your first thought may be to consult your CPA firm. They can guide you through changes to tax law and Generally Accepted Accounting Principles (GAAP) specific to your business and focus your attention on areas that will be most impactful to your business. They are a unique resource that has your best interests in mind and can specifically discuss potential impacts, implementation strategies, and any necessary adjustments to your business to achieve best-in-class results. Whether you are an audit client, a tax client, or both, you should have access to the knowledge of your specific partners or managers on the engagement or you can get on their mailing list for webinars that they conduct regularly, typically at no charge, to keep their own people and clients informed.
Outsourced accounting and finance professionals should never be overlooked. These teams see a variety of businesses and are often called upon to address current issues. They may have seen your issue already and come in ready-made to solve the problem. Fractional resources allow you to engage a highly qualified professional expert in an affordable and efficient way. For a fraction of the cost, you can have a seasoned professional looking out for your best interests. Make sure to ask what they do to stay informed!
Other internal teams are important to bring into the discussion too. Your legal team may have unique perspectives that should be considered including such topics as patent utilization, patent protection, or contractual risk management. Your insurance group should be called in if you have a new product or a new business angle as it may increase or decrease your overall insurable risk. Your banking provider can be important to bring in when you are engaging a new client or a new opportunity that will require investment or slow down your cash flow temporarily. And your internal operations team is essential in this equation as decisions they make may impact your financial reporting requirements. For example, including the first-year extended warranty in your sales price may change how you need to report your revenue. Your outsourced accounting and finance professional can be the “quarterback” for these types of systemic changes as they are typically familiar with each part of your business and how it may be affected by the change.
- Assess and Implement
It’s possible that the changes you learn about in your discovery are a big deal, but it’s equally possible that they will have little impact on your business. Once you have identified and become educated around changes in best practices that you want to adopt, you should assess whether these will have a significant impact on your business.
One approach to assessing the impact of these changes is to apply the knowledge gained in education and involved professionals to your financial statements. This “proforma” presentation doesn’t change your official financial statements but can give you an example of how the changes will affect your reports when compared side-by-side with your standard operating reports. These sample documents can be a good starting point for discussions with outside stakeholders to share what you know about the changes. Consider how the changes might affect your reporting elements like revenue, expense, and balance sheet items. You may need to adjust some of your key performance indicators (KPIs) and profitability metrics to see how this will influence your decision making. And, most importantly, dive deep to assess the impact on real cash flow for your organization.
Once a change is understood, be proactive about implementing the change. This may require changes to your standard accounting policies and procedures manuals and monthly financial reporting packages. In some cases, you may need to update and adapt your accounting software and supporting systems to accommodate those changes. Make sure you engage with experienced professionals to test and implement any modifications thoroughly. And remember to recognize the stated implementation deadlines and be aware that it’s not a race; early adoption is not always your best option.
When you need an outsourced accounting and finance team that is at the forefront of the industry, we can help! At CFO Selections we have a large team of experienced Controllers and CFOs ready to come alongside your business to help it grow. Our trusted financial executives work hard to stay ahead of the changes in the industry so they can bring that expertise to every engagement and demonstrate it in the work they do. Contact us today to find out more!
About the Author
Scott Fowle – Colorado Practice Manager, CFO Selections
Scott Fowle is a Partner with CFO Selections. He joined the business development and marketing team at CFO Selections in 2021 to establish the Colorado practice. Scott started his own outsourced CFO business in Colorado in 2016 serving owners, founders, and business leaders in the financial services, software, construction, manufacturing, and professional services industries.
Prior to working as a CFO consultant, Scott served a variety of executive roles for 15 years at Melco Embroidery Systems, a global manufacturer and retailer of commercial apparel decoration equipment and software. As CFO for ten years, he restructured a struggling business, navigated a recession, built for 3x growth, opened and managed international offices, and positioned for exit to a strategic buyer. As President and Managing Director post-acquisition, Scott established customer relationships, distributor partnerships, and company culture. Scott has worked in a variety of other financial roles including Controller, CPA audit and tax, and Internal Audit.
